While taxpayers can usually deduct state income taxes, that’s not always the case, owing to things such as Alternative Minimum Tax, Pease personal exemption phase-out, and upper-income phase-out of deductions.

Moreover, even recipients who aren’t taxed at over 100 percent could end up worse off than if they received no bonus in some cases. Taxpayers can’t deduct some income-based legal obligations, such as child support, from taxable income. Child support is usually assessed based on pre-tax income under state child-support formulas. And state child support agencies have been known to set annual payments prospectively based on income inflated by one-time bonus payments — even if they are unlikely to recur. (By the way, in case you are wondering, I’m not divorced and don’t owe child support).

A low-paid bank employee married to a professional could be affected by such bonus taxes — say, a bank teller who gets a $10,000 bonus, if she’s married to a lawyer who makes $240,000 per year (bringing them up to the bill’s threshold of $250,000 per year). Her $10,000 bonus would basically be taxed away, as John Hinderaker notes.

Keep in mind that healthy banks were pressured into accepting federal TARP money so that unhealthy banks that also took it would not be stigmatized, as John Hinderaker, Thom Lambert, and John Berlau have noted. And their employees would now apparently be covered by this bonus tax.